Car loan or direct purchase: What are the advantages and disadvantages??Created: 26.05.2020updated: 04.06.2020, 10:51 am
By: Arne Roller
– The Direct purchase provides immediate ownership of the car, should be in times of low Interest but should be well considered
– A Car loan can be made both at the house bank and at a manufacturer-affiliated bank Bank concluded
– The Balloon financing is a special form of car loan.
Munich – For private customers count Direct purchase and Car loan Among the most popular and common ways to buy a car. Both types have their advantages and disadvantages.
Advantages and disadvantages of a direct purchase
The Direct purchase is the easiest and fastest way to buy a new car. Those who pay for their car immediately in cash have the advantage of becoming the owner of the vehicle immediately. Due to the lack of financing, no Bank intermediary as the owner. Probably the biggest of the Advantages of a direct purchase in the Comparison to a Car loan however, is the negotiation of a discount. Because there is no financing risk with a direct purchase, most car dealers are willing to give cash buyers a good discount on their vehicle. The rule of thumb is that a Dealers in the case of direct purchase of a car at a discount of at least ten percent is willing to. One of the Disadvantages of the direct purchase is that this form of the car purchase loads the private fortune at one blow substantially. Cash buyers must therefore think carefully in advance about which vehicle they can afford in the first place. Cash buyers should also be aware in times of low Interest pay close attention to whether it really makes sense to spend all their savings. Namely, if there is the possibility to borrow your own money at a higher interest rate than the one in the car loan or in the Leasing the new vehicle should better be financed by credit.
Advantages and disadvantages of a car loan
A Car loan car buyers can both at their house bank and at a manufacturer-affiliated Bank conclude. Both credit institutions have their Advantages and Disadvantages. Who takes out a car loan through the house bank, has the advantage of independence. The buyer can choose at the Dealer negotiate like a cash buyer, because he is not dependent on the financing by the affiliated car bank. Also the term and the amount of the Installments can usually be determined more individually in the case of financing through the house bank. The possibility of Special repayment is now offered by almost all banks. The advantage of financing through a manufacturer-affiliated bank is in the Compare with the credit of another bank in that many manufacturers offer their vehicles at very favorable conditions with in-house financing. Frequently, however, in such cases a Down payment requires. A credit-financed car purchase has two main disadvantages. Firstly, in contrast to the Direct purchase not immediately the owner of the car. As long as the loan has not been fully repaid, the vehicle serves as collateral property for the financing bank. Secondly, the rate for a car loan may be lower than for the leasing not commercial customers from the Tax can be deducted.
Car loan: what is balloon financing?
A special form of Car loans is the so-called Balloon financing. It is often referred to as a final installment loan because its repayment schedule has a very high Shot rate is provided for – the so-called balloon). As a rule, the final installment exceeds the current Rates of the credit by a multiple. One of the Advantages of balloon financing is that it particularly accommodates buyers who do not have the money to settle their Debt with the Bank or with Dealer have. Borrowers should be aware, however, with balloon financing that if they fail to pay the final installment, they will have to pay a very expensive Follow-up financing to the rescheduling need to complete. Another of the Disadvantages of a balloon financing in the Compare with a Direct purchase, the normal installment loan and Leasing is the relatively high interest rate. It reflects the increased risk of default of this type of financing.